Natural disasters could cost businesses $4.6trn

Lloyd’s City Risk Index warns that a total of $4.6 trillion projected GDP is at risk from manmade and natural disasters in 301 major cities around the world.

Tokyo skyline

Based on original research by the Cambridge Centre for Risk Studies at the University of Cambridge Judge Business School, Lloyd’s City Risk Index shows how governments, businesses and communities are highly exposed to systemic, catastrophic shocks and could do more to mitigate risk and improve resilience.

Just ten threats account for 91% of the Total GDP@Risk.

Nearly half of the Total GDP@Risk is linked to manmade threats, including market crash, cyber-attack, power outage and nuclear accident.

Cities with high asset values are the most financially exposed in absolute terms. Taipei, Tokyo, Seoul, New York, Hong Kong, Shanghai and London have significant levels of economic exposure to catastrophic events.

In an increasingly interconnected and technologically dependent world, four emerging threats — cyber-attack, human pandemic, plant epidemic and solar storm — account for more than one-fifth of the Total GDP@Risk.

Market crash puts the most GDP@Risk globally. It represents nearly a quarter of all cities’ potential losses.

Lloyd’s City Risk Index 2015–2025 shows that, collectively, 71.47% of the Total GDP@Risk is carried by cities in emerging economies.

Exposure to a single natural catastrophe often accounts for high levels of GDP@Risk in cities in emerging economies. Earthquake risk alone represents more than 50% of the Total GDP@Risk in both Lima and Tehran.

GDP in developed cities is most at risk from multiple and often manmade threats. Combined exposure to market crash, oil price shock and cyber-attack represents more than 60% of the Total GDP@Risk in both New York and Paris.

Inga Beale, chief executive of Lloyd’s, said: “Governments and businesses, together with insurers, must work together to ensure that this exposure — and the potential for losses — is reduced.

“Insurers, governments, businesses and communities need to think about how they can improve the resilience of infrastructure and institutions. Insurance is part of the solution.”

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